PACRA Maintains Entity Ratings of Engro Fertilizers Limited

The assigned ratings reflect Engro Fertilizers Limited's ("EFert" or "the Company") entrenched market position as one of Pakistan's leading fertilizer manufacturers, underpinned by a strong operational footprint, established brand equity, an extensive nationwide distribution network, and the financial strength derived from its association with Engro Holdings Limited, one of Pakistan's leading conglomerates with a diversified business portfolio. During CY25, the Company consolidated its competitive standing, retaining a significant market presence and commanding ~34% share of Pakistan's urea offtake, reflective of its distribution capabilities and brand strength. The fertilizer industry occupies a pivotal position within Pakistan's economy, given its direct linkage to agricultural output, food security, and the income base of a predominantly agrarian population. Demand, nonetheless, continued to be shaped by crop economics, prevailing weather conditions, and farmers' purchasing power. Against this backdrop, EFert delivered an improved financial performance during CY25, supported by higher fertilizer sales, favorable pricing, and sustained operational efficiencies, translating into healthy profitability and robust cash flow generation.
The Company's financial performance strengthened during CY25. On an unconsolidated basis, revenue increased to PKR 193.2bln (CY24: PKR 186.7bln), reflecting continued business momentum. Gross margin improved to ~35.4% in CY25 (CY24: ~33.0%), owing to favorable pricing dynamics and efficient cost management. However, net profit declined to ~PKR 23.8bln (CY24: ~PKR 30.2bln), compressing net margin to ~12.3% (CY24: ~16.2%), mainly due to higher finance costs. During 1QCY26, revenue stood at PKR 26.3bln (+8.2% YoY), while net profit further declined to ~PKR 2.9bln (net margin: ~11.0%) compared to ~PKR 3.9bln in 1QCY25 (net margin: ~16.2%), reflecting elevated finance costs due to higher borrowings. Despite this, the Company's financial risk profile remains strong, underpinned by robust operating cash flows, with FCFO’s reporting at PKR 31.5 bln during CY25from PKR 11.9bln in the preceding year. Working capital requirements remained elevated due to higher inventory holdings and seasonal trade receivables, resulting in greater reliance on short-term borrowings.
The capital structure remains leveraged, with gearing rising to 64.4% during 1QCY26. This increase is primarily attributable to higher long-term borrowings secured to finance the Production Enhancement Facility (PEF) project and maintenance capital expenditure. The PEF project is aimed at improving plant reliability, operational efficiency and production optimization. Short-term borrowings accounted for 32% of the total debt mix, primarily reflecting working capital requirements.
The ratings remain dependent upon the Company's ability to sustain its strong market position, maintain operational efficiencies and preserve healthy cash flow generation amidst evolving industry dynamics and increasing competitive pressures. Sustained profitability, supported by stable demand fundamentals and effective management of input cost volatility, will continue to support the assigned ratings.

About the Entity
EFERT was incorporated in 2009 as a listed company with the principal objective of manufacturing and marketing urea and other fertilizer products. The Company operates three production facilities: the base plant and EnVen at Daharki with (975,000 MT & 1,300,000 MT capacity), respectively; and an NPK facility at Zarkhez (100,000 MT capacity), while DAP and other phosphatic fertilizers are imported and marketed through an established nationwide distribution network. EFert remains a subsidiary of Engro Holdings through Engro Corporation Limited, which holds approximately 56.27% shareholding. Other significant stakeholders include insurance companies (~10.39%), mutual funds (~3.46%), and the general public (~20.6%). Mr. Ahsan Zafar Syed chairs the Board, while Mr. Imran Ahmed serves as Chief Executive Officer.